Congress Must Reform the Broken 340B Program

December 14, 2017

The Centers for Medicare and Medicaid Services recently finalized a rule, set to take effect January 1, that would reduce reimbursements to hospitals that administer 340B drugs. Currently, hospitals are reimbursed for the average sales price of a drug, plus an additional 6 percent to cover overhead costs.

This reimbursement rate makes sense when hospitals buy drugs at the average sales price. But it makes no sense when they buy drugs at a steep discount.

The CMS rule would change the reimbursement rate to the average sales price of a drug minus 22.5 percent. That’s more in line with hospitals’ actual acquisition costs. The change would save CMS $1.6 billion.

via Congress Must Reform the Broken 340B Program

How Protected Classes in Medicare Part D Influence Drug Spending and Utilization: Evidence from the Synthetic Control Method

December 14, 2017

When the Medicare Part D prescription drug benefit was implemented in 2006, six drug classes were designated “protected classes.” Because responsibility for obtaining favorable drug prices depends on private insurers’ abilities to negotiate with pharmaceutical manufacturers using the threat of formulary exclusion, the protected class designation could undermine the insurers’ ability to control spending and utilization of drugs in these six classes. I estimate the effect of the protected class policy on total drug spending and utilization for Medicare beneficiaries. Following Abadie et al. (2010), I employ the synthetic control method on 2001-2011 data from the Medical Expenditure Panel Survey (MEPS). I find that protected status led to a significant increase of approximately $1.02 billion per class per year in overall spending for drugs in protected classes. Results for drug utilization were also positive but not significant. These results are important for informing the recent and ongoing deliberation by the Medicare program over whether to remove several classes from protection.

via How Protected Classes in Medicare Part D Influence Drug Spending and Utilization: Evidence from the Synthetic Control Method by Courtney Yarbrough :: SSRN

U.S. 2050 Project

December 12, 2017

What will America look like at mid-century? US 2050 is an initiative of the Peter G. Peterson Foundation and the Ford Foundation to examine and analyze the multiple demographic, socioeconomic, and fiscal trends that will shape the nation in the decades ahead. Engaging leading scholars in multiple disciplines including demographics, poverty studies, labor economics, macroeconomics, political science, and sociology, US 2050 will create a comprehensive view of our economic and fiscal future – and the implications for the social and financial well-being of Americans.

via US 2050

Regulation Strategies for the Provision of Paternalistic Goods

December 9, 2017

In this study, we analyze the regulation of markets for the provision of services whose costs are subsidized for paternalistic reasons. We model the choice of a benevolent regulator who wants to maximize consumer welfare in a setting where quality cannot be verified and the good provided is fully subsidized. The choice is thus made between two types of providers (profit maximizers and altruistic providers) and two frameworks (monopoly franchise and quality competition). Our analysis shows that in this environment the performance of mixed markets is always dominated by pure forms. Moreover, although making efficient providers compete for the market minimizes cost, the choice of quality competition with altruistic providers may be preferable from a welfare point of view whenever service quality is relevant and the productivity differential is not substantial.

via Regulation Strategies for the Provision of Paternalistic Goods by Laura Levaggi, Rosella Levaggi :: SSRN

Editor’s note: the U.S. health system is a “mixed markets” approach, implying we could maximize welfare by moving towards market competition or quality competition using altruistic providers.

No ‘Honeymoon Phase’ – Whose Health Benefits from Retirement and When

December 9, 2017

I use a fixed effects instrumental variable approach to determine the effect retirement has on health. The exogenous variation in the probability to retire at the normal and early retirement age thresholds is exploited to instrument for the otherwise endogenous retirement decision. Six health aspects are considered: self-assessed health, depression, limitations in (instrumental) activities of daily living, mobility limitations, grip strength and number of words recalled. Using data for 10 countries from the Survey of Health, Retirement and Ageing in Europe (SHARE), I find that retiring both at the normal and early retirement eligibility ages significantly improves all health aspects, including the objective measure grip strength. Results do not generally support the theory that previous research was biased towards zero due to behavioral changes during the anticipation phase prior to retirement. Results also do not show the presence of a honeymoon phase directly following the start of retirement, in which individuals are believed to experience a euphoric state leading health improvements. It appears that individuals, especially blue collar workers, go through an adjustment period after retirement in which they experience more health problems, before stabilizing and improving. Overall, retirement has a health preserving effect for both genders and all occupations in the long term. Neither blue collar workers nor workers with physically or psychologically demanding jobs benefit more from retirement than others.

via No ‘Honeymoon Phase’ – Whose Health Benefits from Retirement and When by Birgit Leimer :: SSRN

The Demographic Deficit

December 9, 2017

There has been a slowdown in growth in the world’s most advanced economies. In this paper we argue that changing demographics, in particular aging populations combined with increased life expectancy, may be part of the explanation for why we observe slower growth, falling interest rates and falling productivity growth. Using Japan and the U.S. in the years prior to the financial crises as a case study, we provide estimates of the growth deficit that arises from an aging cohort structure and increasing life expectancy. We also provide projections of the impact of predictable demographic changes on future growth in the U.S. and Japan.

via The Demographic Deficit by Espen Henriksen, Thomas Cooley :: SSRN

Trends in Cancer Survival by Health Insurance Status in California From 1997 to 2014

December 8, 2017

Question  Have patients with different types of health insurance benefitted equally from recent improvements in cancer survival?

Findings  In this large population-based study, improvements in survival between January 1997 and December 2014 were limited to patients with private or Medicare insurance. Survival disparities for uninsured or other publicly insured patients with prostate, lung, or colorectal cancer increased significantly over time.

Meaning  To mitigate these growing disparities, patients with cancer need access to health insurance that covers all the necessary elements of health care, from prevention and early detection to timely treatment according to clinical guidelines.

via Trends in Cancer Survival by Health Insurance Status in California From 1997 to 2014 | Colorectal Cancer | JAMA Oncology | The JAMA Network